DOCEBO, INC.
Strong Growth As Online Learning Becomes More Crucial
Our Conclusion
Docebo reported subscription growth of 61% Y/Y as customers transition to
online learning in the current pandemic. The company announced two
significant customer wins in the quarter, signing agreements to provide
training to Walmart and Barilla Pasta. While expenses were higher than
expected given new hires, we expect the expense base to remain relatively
stable from here. With Docebo seeing growth in a COVID environment, we
have re-instated our pre-COVID price target of $22 (prior $18) based on a 5x
P/S multiple. We retain our Outperformer rating.
Key Points
Subscription Growth: Docebo’s core subscription revenue of $12.2MM
grew 61% Y/Y and was above our estimates of $11.3MM. Growth drivers
included increasing customer counts and growth in average contract values.
Annual Recurring Revenue of $52.1MM was up 10% Q/Q from $47.2MM.
Significant Customer Wins: Docebo announced new subscription
agreement wins with Walmart and Barilla Pasta. Walmart will use Docebo’s
LMS to train partners on how to best sell their products on Walmart.com.
Partner enablement is a key use case for Docebo, as over half of its
customers use the LMS for this purpose. Barilla, the largest pasta producer
in the world, chose Docebo to replace its existing LMS and to provide internal
training for 8,000+ employees.
Profitability: Adjusted EBITDA was -$2.4MM in the quarter (-17.8% margin),
below consensus estimates of -$1.2MM (-9.7%). Margins were impacted by
an increase in compensation costs given hiring for expected demand in 2020
and to position for 2021. Docebo added 75 new employees in Q1, primarily
(40%) in sales and marketing. We believe that 2020 hiring is now mainly
complete and expect expense growth to flatten from here, contributing to an
expected margin improvement over the remainder of 2020.
Average Contract Values Climb: The shift to targeting enterprise customers
continues to increase average contract value (ACV), as the measure was up
28% Y/Y from $21,000 to $26,900. The average ARR of deals signed in the
quarter was over $37,000, and we expect ACV to continue to rise as deal
sizes grow. Docebo now has a minimum subscription value of $20,000,
which helps contribute to sustainable ACV growth.
COVID-19 Impact: Docebo’s business model is well designed to operate in a
remote working/sales environment. To date, the company noted almost no
interruption to its sales cycle, with only the largest enterprise deals seeing a
potential delay. The priority of the sales teams has shifted, as the number of
inbound leads has increased. Sales staff have been redeployed from
outbound to inbound sales to meet shifting demand. Customer usage of the
LMS has increased ~25% from pre-COVID levels, resulting in a slight
headwind to gross margins as server costs increase in line with usage.